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pop goes the tech bubble

What’s the Matter With Zynga?

Left: Zynga CEO Mark Pincus. Right: Dan Porter.

This was supposed to be a story about a guy building a highly anticipated mobile game. Instead, it’s a story about a multi-billion-dollar Internet company that is almost certainly headed for disaster.

A few months ago, I got a call from Zynga, the web gaming behemoth behind games like FarmVille and CityVille. They wanted me to write about their big upcoming game, Draw Something 2, a sequel to the well-known Pictionary clone. After Zynga bought the company behind Draw Something, the New York–based OMGPop, for roughly $200 million last year — its biggest acquisition ever — the company hired OMGPop CEO Dan Porter, put him in charge of their New York mobile game unit, then immediately tasked him with making a follow-up version.

I don’t usually write about gaming, but Porter, a plaid-clad Brooklyn dad who worked as Teach for America’s president before striking it rich in app-land, seemed like he might have interesting things to say. So I agreed.

Over the next few weeks, I had lunch with Porter twice and watched his team putting the final touches on Draw Something 2 at his team’s lower Manhattan office. Zynga was clearly pumping a lot of time and money into Porter’s effort, and he seemed optimistic that the sequel game would replicate the success of the original. I knew Zynga had been struggling with a declining stock price and flagging interest in its games, but it appeared as if the OMGPop team had some potential — however slim — to help reverse the ailing company’s slide with a monster hit.

Then something weird happened. Earlier this month, just a few weeks before Draw Something 2 was scheduled to launch in the U.S., Zynga announced that Porter was leaving the company under mysterious circumstances. He stopped returning my e-mails, and all Zynga would give is a rote "we wish him well in his future endeavors" statement. When I pressed for more details about Porter’s departure, I learned that not even some people with direct lines to Porter knew exactly what had happened to him. He hadn’t been fired, exactly. And he hadn’t exactly quit. He had just disappeared, right before his major product debut.

I still don’t know what happened to Porter. I’ve heard rumors that he satisfied the terms of his Zynga contract, then left as soon as he was allowed. I’ve also heard that Porter never recovered internally from a series of too-honest comments he made about Zynga's falling stock price and its habit of copying games from smaller competitors. Several people close to the situation described Porter's situation as a "bad culture fit," but those same people also characterized his departure as a mutual decision between him and Zynga CEO Mark Pincus. (My guess is that Porter and Pincus — two strong personalities accustomed to calling their own shots — butted heads early on, then tolerated each other for months until an easy exit could be arranged.)

What I do know is that Zynga can’t afford a lot of drama right now. Yesterday, the company reported terrible first-quarter earnings, with revenue off 18 percent of last year’s levels, daily active users that are at an all-time low, and forward guidance so bad that it sent the stock price down more than 10 percent in after-hours trading. Since it went public in December 2011, Zynga has lost nearly 70 percent of its market value, and a wave of layoffs and executive departures has made many outsiders talk about the company as if it's on its deathbed.

Mobile games, the genre that made Porter his millions, have been an especially sore spot for Zynga, which makes the company's decision to let him go all the more baffling. Yesterday, Zynga up and admitted that it needs to do a better job of connecting with mobile gamers. “Users are migrating to mobile, and our marketshare on the Web is larger than it is on mobile,” chief revenue officer Barry Cottle told AllThingsD.

Draw Something 2, the biggest mobile bet Zynga has made so far, may be a huge hit. But it could also flop. Gamers lost interest in the original Draw Something just days after Zynga bought OMGPop (a feat of timing on Porter's part that led at least one rival game executive I spoke with to dub him "the luckiest man in the world"). And the new version of Draw Something, while a solid improvement — it has features like an Instagram-like feed of drawn images — may not be different enough to lure back fans of the original.

But at least it had potential. While watching the Draw Something 2 team plot their launch last month, I remember feeling a vague sense that Zynga might not be doomed after all – that maybe it could ride Porter and his New York team all the way back to profits and respectability.

But with Porter gone, Zynga has lost perhaps the only executive it had who actually knew how to build a successful mobile game. The company's mobile hopes now rest with a team of engineers in New York, many of whom worked for Porter at OMGPop and are still fiercely loyal to him. And yesterday's earnings call didn't exactly inspire confidence in Zynga's remaining executives, one of whom said, "We think 2013 is going to be bumpy." (Translation: We're going to lose a lot of money.)

Although I didn't see Porter's ouster coming, it was clear to me that he wasn't completely happy at Zynga. At our last lunch, when I’d asked him how his life had changed since his Zynga windfall, he gestured at the two media-relations people sitting next to us, and said with a smile, “I have handlers now.” When I asked him if he planned to stay at Zynga in the long term, he hemmed and hawed, and called my question “too on the spot” before changing the topic. Recently, he's updated his LinkedIn profile to note that although he had overseen the launch of both Draw Something and Draw Something 2, there were "No more somethings" in his future.

I'm worried about what Porter's departure says about Zynga. After yesterday's dismal results, the company appears to have very little gas left in the tank, and few new ideas. Clearly it has some management issues that may eclipse even a wild success with Draw Something 2. Maybe its jig is simply up — it sold as many purple cows and virtual bridges as Facebook time-wasters were willing to buy. Or maybe it doomed itself by pursuing expensive acquisitions like OMGPop and building derivative games that couldn't sustain people's interest for long enough to sell them stuff.

Whatever the case, one thing is clear: Nobody should feel too bad for Dan Porter. As it turns out, he may have gotten out of Zynga just in time to avoid the coming crash. And he's still got his share of $200 million to keep him warm. These days, he seems to be laying low, save for the occasional blog post. But this morning, he broke his silence with a Twitter tribute to his former team.

"Congrats to the crew who took Draw Something 2 over the finish line," he wrote. "It was a long journey but it's finally here."

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Photo: David Paul Morris/Bloomberg; Farmville; Zynga; Ramin Talaie/Bloomberg via Getty Images